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Special teams also raided the premises of Chidambaram and INX’s Indrani and Peter Mukherjea over irregularities in manner in which FDI approval was granted.

The first page of the FIR. Credit: The Wire

New Delhi: The Central Bureau of Investigation, on Monday, registered a case against Karti P Chidambaram, son of former finance minister P Chidambaram, for allegedly interfering and influencing the manner in which the Foreign Investment Promotion Board treated INX Media Private Limited, a company whose directors were Indrani Mukherjea and Pritam ‘Peter’ Mukherjea.

The FIR that was registered also fingers the Mukherjea couple, a company called Advantage Strategic Consulting (represented through its director Padma Viswanathan) and “unknown officers/officials of M/o Finance, Govt of India”.

In the early morning hours of Tuesday, the CBI’s special teams conducted searches of the premises of the accused in Delhi, Mumbai, Hyderabad and Chennai over alleged irregularities in the manner in which INX Media received foreign direct investment to the tune of Rs 305 crore.

What’s the case against the Mukherjeas?

In early 2007, INX Media Pvt Ltd, which was co-founded by Indrani and Peter Mukherjea, approached the Foreign Investment Promotion Board (FIPB) for issuing equity shares to three non-resident investors under the FDI route. This money, according to the FIR, was sought for creating and operating a number of television channels. In its application to the FIPB, INX also announced its intention to “make a downstream financial investment to the extent of 26% of the issued and outstanding equity share capital of INX News Private Limited”.

In July 2007, the FIPB board approved INX’s proposal, specifically an FDI/NRI inflow of Rs 4.62 crore, but did not approve the proposed downstream investment. In fact, its note to the FIPB board, the FIPB unit of the finance ministry noted that “downstream investment in INX News Pvt Ltd” would require separate approval.

This is where things went wrong. The FIR primarily alleges that “INX Media deliberately and in violations of the conditions and approval i) made a downstream investment… and ii) generated more than Rs 305 crore foreign direct investment in INX Media Pvt Ltd against the approved foreign inflow of Rs 4.62 crore by issuing shares to foreign investors at a premium of more than Rs 800 per share.”

Or in other words, while the Mukherjeas’ company had officially received permission to raise Rs 4.62 crore in FDI, they actually raised over Rs 300 crores. It also allegedly went ahead with the downstream investment despite not having received approval.

When these violations came to light in early 2008, the “FIPB unit” informed income tax authorities that it was looking into the matter and shot off a letter to INX Media.

Karti Chidambaram’s role

The CBI, in its FIR, alleges that INX Media then turned to Karti Chidambaram “in order to wriggle out of the situation without any punitive action”. “Upon receipt of this letter from FIPB unit, INX Media Limited… entered into a criminal conspiracy with Shri Karthi P Chidambaram, son of P Chidambaram, the-then Finance Minister”.

INX Media reached out to Karti Chidambaram, the CBI says, to specifically get this issue resolved by “influencing the public servants of the FIPB unit of Ministry of Finance by virtue of his relationship with the Finance Minister”.

Karti Chidambaram’s role, the FIR notes, played out primarily through a company called Chess Management Services Limited; a company in which the junior Chidambaram was a director. On the basis of “clarifications suggested by Chess Management Services”, INX Media then replied to the FIPB unit with a number of justifications.

The FIR, crucially, notes that because of Karti Chidambaram’s influence, officers within the finance ministry “ignored the serious illegality on the part of INX Media” and also continued to show “undue favour to the INX Group” by advising them to apply for fresh FIPB approval for the downstream investment even though it had already been made.

“In their endeavour to to show undue favour…the officers/officials of the FIPB unit also ignored the request of the Department of Revenue to investigate the matter as to how downstream investment in INX News Pvt Ltd was made by the company without FIPB approval,” the FIR alleges.

The investigation agency further points out that after deliberately concealing that a downstream investment had been made, INX Media again approached the FIPB unit for approval which was then approved.

“The concurrence to the proposed investment which had already been made without the approval of the Finance Ministry show the malafide and dishonest intention on the parts of officials of the ministry…,” the FIR states.

Surreptitious payments?

The FIR registered by the CBI quotes sources to show how Karti Chidambaram was allegedly paid for his role in influencing the investigation against INX Media. According to the CBI, “for the services rendered by Karthi P Chidambaram to INX Group through Chess Managament Services…considerations in the form of payment were received against an invoice raised on INX Media by one Advantage Strategic Consulting (P) Limited (ASCPL).

The CBI points out that the “very reason for getting the invoice raised in the name of M/s/ ASCPL for the services rendered by Chess Management Services was with a view to conceal the identity of Shri Karti P. Chidambaram…whereas ASCPL was being controlled by him indirectly”.

The FIR also notes that invoices for approximately Rs 3.5 crore were also raised in favour of INX Group “in the name of other companies in which Shri Karti P Chidambaram was having sustainable interests either directly or indirectly”.

Chidambarams respond

The Wire has reached out to Karti Chidambaram and will update this story with his statement when it is received. In statements to the media, Karti has pointed out that this case is “political vendetta”.

Former finance minister P Chidambaram,has also alleged that the central government, along with the CBI has targeted him and his son.

“They want to silence my voice and stop me from writing,” he said in a statment.

In his statement, the former finance minister also pointed out that there were “no allegations against the five secretaries, who constitute the FIPB, other officials and competent authorities who are public officials”. Also, Chidambaram pointed out that every case was processed according to the law and approval was granted or refused in accordance with the recommendations of the FIPB. “There is no allegation against me”, he said.

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